Business: Accounting Fundamentals

What is the fundamental accounting equation?

Assets = Liabilities + Equity

What are assets in an accounting context?

Resources owned by a business that have future economic value.

What are liabilities?

Obligations or debts that a company owes to outside parties.

What is owner's equity?

The residual interest in the assets of an entity after deducting liabilities.

Which financial statement reports a company's financial position at a specific point in time?

The Balance Sheet

What is the primary purpose of an Income Statement?

To show a company's revenues and expenses over a specific period.

In double-entry bookkeeping, what does every transaction require?

At least one debit and at least one credit that equal each other.

What is the 'normal balance' for asset accounts?

A debit balance.

What is the 'normal balance' for liability and equity accounts?

A credit balance.

What does the Revenue Recognition Principle state?

Revenue should be recorded when it is earned, regardless of when cash is received.